Customers ’R First Bank is planning to offer a new debit card for which it expects to charge $1 per trans-

Regression Results action. The following cost estimates have been made assuming | million transactions during the first LO 3) month that the card is used.

any Direct labor $500,000 (the labor rate is $25 an hour X 20,000 estimated direct-labor hours)

Overhead costs have not yet been estimated for the new product, but 12 months of data on total production activities and overhead costs have been analyzed for similar products using simple linear regression.

The following results were derived from the simple regression and provide the basis for overhead cost estimates for the new product:

SUMMARY OUTPUT Dependeni variable = Overhead costs Regression Statistics R-square 0.8803 Standard error 6,175.0321 Observations 12 Independent Variable Coefficients Intercept Ait dOS. O80 Direct labor hours 5.496 Required

a. What percentage of the variation in overhead costs is explained by the independent variable? §. dg: 03 2

b. What is the total overhead cost for an estimated ne level of 20,000 direct-labor hours per month? a Sp) 2 072

c. Will the $1 per transaction op, cover the costs o pe ee and oes

d, assuming one million transactions?